JOWERS v. DME INTERACTIVE HOLDINGS

The opinion of the court was delivered by: KEVIN FOX, Magistrate Judge

REPORT AND RECOMMENDATION

I. INTRODUCTION

Stephanie Jowers ("Jowers"), who is white, brought this action
against DME Interactive Holdings ("DME") and Darien Dash ("Dash")
to recover damages she suffered when the defendants failed to
negotiate an employment contract with her and, ultimately,
terminated her employment, because of her race, in violation of
42 U.S.C. § 1981, as well as state and municipal human rights
laws.

By order of the court dated September 22, 2004, the defendants'
counsel was relieved of the obligation of continuing to represent
the defendants. Since that time, the defendants have failed to
defend against this action. Therefore, on March 16, 2005, your
Honor ordered that a default judgment be entered against them.
Thereafter, your Honor referred the matter to the undersigned to
conduct an inquest and to report and recommend the amount of
damages, if any, to be awarded to the plaintiff. The Court directed Jowers to serve and file proposed findings
of fact and conclusions of law, and an inquest memorandum setting
forth her proof of damages, costs of this action, and attorney's
fees. The Court also directed the defendants to serve and file
any opposing memoranda, affidavits and exhibits, as well as any
alternative findings of fact and conclusions of law it deemed
appropriate. The Court received the parties' respective
submissions and has considered them.

II. BACKGROUND

Based upon the submissions made by the parties, the complaint
filed in the instant action and the Court's review of the entire
court file in this action, the following findings of fact are
made:

On May 5, 2000, Jowers was terminated from her position as a
senior manager in DME's Places of Color Division ("PCD"). At the
time, DME was a high-profile minority-managed Internet company,
led by Dash. Dash is a black man, who is the company's chief
executive officer and its principal shareholder. Jowers began her
tenure at DME as an independent contractor. It was agreed that
her annual salary would be $75,000, pending the execution of a
written employment contract. However, no such contract was ever
provided to Jowers.

Jowers was responsible for the day-to-day management of PCD's
staff, most of whom were persons of color. In the weeks preceding
Jowers's termination, PCD staff members were openly hostile
towards her. DME employees assigned to PCD refused to be managed
by Jowers because of her race, and voiced their discontent with
having to work under her supervision.

Jowers' direct supervisor, Wendy Dubit ("Dubit"), and DME
officers, including Dash, were aware of PCD's racially hostile
work environment. During staff meetings attended by Dash, PCD staff members announced that they refused to work for
Jowers because of her race. In addition, Dubit told Jowers that
DME's chief operating officer, Thomas O'Rourke ("O'Rourke"),
wanted a black person in the plaintiff's job because it would
improve the company.

Approximately one week before the plaintiff's employment was
terminated, O'Rourke restructured Jowers' position so that her
direct contact with PCD's staff would be reduced. On May 5, 2000,
O'Rourke informed Jowers that her employment was terminated.
O'Rourke explained that the decision to terminate Jowers'
employment was an economic one, since Jower had been an excellent
employee. Later that day, Dash told Jowers that her termination
was not the result of DME's financial condition, but rather, was
a consequence of Jowers not being a "good fit." Dash alluded to
the complaints made by PCD staff. Jowers maintains that her
employment by DME was terminated because of her race.

Jowers was not paid for the last 12 days she was employed by
DME. Moreover, Jowers was not reimbursed for the expenses she
incurred during that twelve-day period. Jowers' submissions aver
that she is entitled to recover: $3,461.54 for unpaid wages owed
to her for the last 12 days she was employed by the defendants,
plus 25 percent of that amount in liquidated damages; $358.51 for
employment-related expenses she incurred during the same
twelve-day period; $50,000 in back pay; $100,000 in compensatory
damages for emotional distress; prejudgment interest; and
$250,000 in punitive damages.

Dash maintains that he is not personally liable to the
plaintiff for any damages she seeks to recover. However,
notwithstanding Dash's assertion, the defendants contend that the
plaintiff is entitled to recover: $3,819.95 for unpaid salary and
expenses; $11,538.48 in back pay; nominal damages for pain and suffering; prejudgment interest; and, should
the Court determine that an award of punitive damages is
warranted, minimal punitive damages.

III. CONCLUSIONS OF LAW

When a defendant defaults in an action, by failing to defend
against the allegations made in a complaint, the defendant is
deemed to have admitted every well-pleaded allegation in that
complaint except those relating to damages. See Cotton v.
Slone, 4 F.3d 176, 181 (2d Cir. 1993); Greyhound Exhibitgroup,
Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992).
In addition, the plaintiff is entitled to all reasonable
inferences from the evidence presented. See Au Bon Pain Corp.
v. Artect, Inc., et al., 653 F.2d 61, 65 (2d Cir. 1981). Damages
must be established by the plaintiff in a post-default inquest.
In conducting an inquest, the court need not hold a hearing "as
long as it [has] ensured that there [is] a basis for the damages
specified in the default judgment." Transatlantic Marine Claims
Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir.
1997). The court may rely on affidavits or documentary evidence
in evaluating the fairness of the sum requested. See Tamarin
v. Adam Caterers, Inc., 13 F.3d 51, 54 (2d Cir. 1993).

Unpaid Wages Under New York Labor Law

Pursuant to New York Labor Law § 190 et seq., an employee
is entitled to recover unpaid wages. Moreover, if the failure to
pay wages to an employee is willful, the employee is also
entitled to recover liquidated damages in an amount that is 25
percent of the unpaid wages. See New York Labor Law §
198(1)(a). Willfulness may be demonstrated by "knowingly,
deliberately and voluntarily" failing to pay an employee. P & L
Group, Inc. v. Garfinkel, 150 A.D.2d 663, 664, 541 N.Y.S.2d 535, 537 (App.Div. 2d Dep't 1989).

In their inquest submissions, the defendants admit that they
knowingly failed to pay Jowers the wages she was owed. The
defendants attribute their failure to compensate Jowers to DME's
financial problems. Based on the defendants' admission of their
liability, the Court finds that the plaintiff is entitled to
recover $3,820.03,*fn1 plus prejudgment interest calculated
from May 5, 2000, at the rate of nine percent per year. See New
York Civil Practice Law and Rules ("CPLR") § 5004.

Based on the defendants' admission, the Court also finds that
their failure to pay Jowers was willful. Therefore, Jowers would
appear to be entitled to recover liquidated damages. However, the
defendants contend that Rule 54 of the Federal Rules of Civil
Procedure bars Jowers from recovering liquidated damages. That
Rule provides that "[a] judgment by default shall not be
different in kind from or exceed in amount that prayed for in the
demand for judgment." Fed.R.Civ.P. 54(c); see Marina B
Creation S.A. v. Ada de Maurier, 685 F. Supp. 910, 912-13
(S.D.N.Y. 1988) (denying treble damages because no demand for
treble damages was made in the complaint). Although, through her
complaint, Jowers requested "a money judgment for her damages,
including but not limited to unpaid salary," she failed to make a
specific request for liquidated damages. Moreover, the complaint
did not give notice that Jowers was seeking liquidated damages by
making a citation to the applicable provisions of New York's
Labor Law. Jowers also failed to give notice of her intention to
seek liquidated damages in her motion for a default judgment.
See Marina B Creation S.A., 685 F. Supp. at 912 (noting the possibility of permitting increased damages on default, if the
motion for default judgment contains the increase). Consequently,
the Court finds that Fed.R.Civ.P. Rule 54(c) bars an award of
liquidated damages to Jowers.

Accordingly, the Court finds that Jowers is entitled to recover
$3,461.52 in unpaid wages and $358.51 in employment-related
expenses, plus prejudgment interest calculated from May 5, 2000,
at a rate of nine percent per year.

The record before the Court established that the defendant
violated § 1981, as well as provisions of applicable state and
municipal human rights laws. "An individual who establishes a
cause of action under § 1981 is entitled to both equitable and
legal relief, including compensatory . . . damages." See
Johnson v. Railway Express Agency, 421 U.S. 454, 460,
95 S. Ct. 1716, 1720 (1975). Similar relief is available under New York
state and municipal anti-discrimination laws. See New York
Executive Law § 297(4)(c); New York City Administrative Code §
8-107. However, a victim of employment discrimination has the
duty to mitigate his damages by "us[ing] reasonable diligence in finding other
suitable employment." Clarke v. Frank, 960 F.2d 1146, 1152 (2d
Cir. 1992); see also New York City Bd. of Educ. v. Simley,
96 A.D.2d 947, 949, 466 N.Y.S.2d 401, 404 (App.Div. 2d Dep't
1983) (holding plaintiff has a duty to mitigate under New York
Executive Law § 296).

Jowers contends that she is entitled to back pay for one year,
that is, for the period May 2000 to May 2001, at her annual
salary of $75,000, offset by her post-termination earnings of
$25,000. In support of her request for back pay through May 2001,
the plaintiff offers the following facts to demonstrate that, had
she not been the victim of unlawful discrimination, she would
have been extended an employment contract and would have remained
employed by the defendants for one year after her termination:
(1) the defendants promoted a black employee, who was Jowers'
subordinate, to assume Jowers' responsibilities, following
Jowers' termination and (2) an April 2001 magazine article
reported that the defendants continued to employ staff even after
extensive layoffs had been affected. In addition, in a
declaration Jowers submitted to the Court in connection with the
inquest, Jowers states that she learned from DME employees and
published reports that a large number of employees continued to
work for DME through mid-2001. However, except for the magazine
article, Jowers has failed to present any other published reports
to the Court, or any competent evidence from the employees who
are alleged to have provided her the information upon which she
relied when she prepared her declaration, to support her back pay
request.

The defendants maintain that, notwithstanding any alleged
discriminatory conduct, Jowers' employment would have been
terminated by June 30, 2000, due to mass layoffs DME had to
effect to remain in business. The defendants contend that
administrative employees, such as Jowers, were the first employees whom DME terminated. In
support of their position that any award of back pay should be
limited to the date of June 30, 2000, the defendants submitted to
the Court payroll records indicating that 83 employees worked at
DME in 2000, exclusive of independent contractors, such as the
defendants contend Jowers was. Furthermore, according to the
defendants, by the third quarter of 2000, only 31 employees
remained in DME's employ. Moreover, in a declaration submitted to
the Court, O'Rourke explains that, by the end of the summer of
2000, only a "skeleton crew" was employed in DME's PCD and, by
the end of that year, DME was primarily winding up its business.

Although it is clear that DME reduced its workforce drastically
between May 2000 and early 2001, the defendants have not
demonstrated that Jowers' employment would have been terminated
by June 30, 2000, regardless of their unlawful discriminatory
behavior. For example, the defendants have not provided the Court
with any evidence showing: (i) the actual number of
administrative staff members whose employment was terminated;
(ii) the specific functions these employees performed; or (iii)
the dates on which administrative staff members were dismissed.
Evidence of this nature might have enabled the Court to
determine, with greater particularity, the probable date on which
Jowers would have been terminated as a result of DME's reduction
of its workforce.

Under the circumstances, the Court finds that Jowers is
entitled to compensation beyond June 30, 2000, since it is clear
from the parties' submissions that approximately thirty
individuals remained employed through December 2000, and that
Jowers' responsibilities were assumed by another DME employee
after Jowers was dismissed. Furthermore, the assignment of
Jowers' responsibilities to another employee who is black,
supports a strong inference that DME's reduction in its workforce did not diminish its need for the
services Jowers had provided to the defendants prior to her
termination and lends credence to Jowers' contention that her
dismissal was race-based. Based on the record before the Court,
it is reasonable to conclude, that had Jowers not been the victim
of unlawful discrimination, she would have remained employed with
DME through December 2000. Therefore, Jowers is entitled to an
award of $50,000 in back pay (eight months at an annual salary of
$75,000).

The rate at which prejudgment interest is to be calculated is
within the court's discretion. See Endico Potatoes, Inc. v.
CIT Group/Factoring, Inc., 67 F.3d 1063, 1071 (2d Cir. 1995).
Where a judgment is based on violations of both federal and state
law, courts in this circuit have set the rate of prejudgment
interest at the 52-week Treasury bill yield rate referred to in
28 U.S.C. § 1961(a). See Robinson v. Instructional Sys.,
Inc., 80 F. Supp. 2d 203, 208 (S.D.N.Y. 2000). In Robinson,
the court used the following three-step formula to determine how
prejudgment interest should be calculated:

First, the [award] should be divided pro rata over
the appropriate time period . . . Second, once the
award is divided, the average annual United States
treasury bill rate of interest referred to in
28 U.S.C. § 1961 will be applied . . . Third and
finally, in order to guarantee complete compensation
to the plaintiff, the interest will be compounded
annually.

Robinson, 80 F. Supp. 2d at 208 (citations omitted).

The plaintiff is entitled to prejudgment interest on her back
pay award of $25,000. The average annual Treasury bill rate of
interest, referred to in 28 U.S.C. § 1961, for the years 2000
through 2005, should be applied to the backpay award; the
interest should be compounded annually. Pain and Suffering

In a discrimination action brought under both federal and state
law, a prevailing party may be awarded compensatory damages for
an emotional injury. However, "[a] plaintiff must introduce
evidence of actual mental or emotional injury in order to recover
compensatory damages." McIntosh v. Irving Trust Co.,
887 F. Supp. 662, 665 (S.D.N.Y. 1995). "Under the New York Human Rights
Law . . . proof of mental anguish or emotional distress does not
have to include medical testimony and it may consist of the
plaintiff's testimony, alone, as corroborated by reference to the
circumstances of the alleged misconduct." Id. at 666.

A broad spectrum of damages has been awarded for pain and
suffering under New York law, but the case law provides little
guidance in determining what an excessive award of damages for
such an injury might be. See Courtney v. City of New York,
20 F. Supp. 2d 655, 661 (S.D.N.Y. 1998). In cases involving a
"garden variety" emotional distress claim, that is, a claim for
which medical treatment was not sought, awards have ranged from
$5,000 to $30,000. See Kuper v. Empire Blue Cross & Blue
Shield, No. 99 Civ. 1190, 2003 WL 359462, at *12 (S.D.N.Y. Feb.
18, 2003) (collecting cases); see also Epstein v.
Kalvin-Miller, 139 F. Supp. 2d 469, 480 (S.D.N.Y. 2001) (listing
cases that fall within the $5,000 and $20,000 range, while also
noting that cases have exceeded this range without
distinguishable facts). Important factors in assessing an
appropriate amount to award for emotional suffering include "the
amount, duration, and consequences of [the claimant's] emotional
distress." See Kuper, 2003 WL 359462, at *14.

Jowers requests $100,000 in damages for her pain and suffering.
Jowers' declaration recounts that she suffered "stress, anger,
sadness . . . frustration" and public humiliation as a result of
the defendants' discrimination. Moreover, Jowers contends that
for one year following her departure from DME, she suffered from panic attacks, physical
illness and depression. Jowers also reports that she experienced
insomnia, a condition that she says continues to this day Jowers
maintains that she was reluctant to tell her family and friends 
especially her friends of color  about the racial hostility she
experienced at DME because she did not want to be seen as a
"victim." This, she says, caused her to experience an increased
level of emotional turmoil.

In opposing Jowers' request for damages for emotional injury,
the defendants contend that if any such damages are awarded, they
ought to be nominal damages because the period of discrimination
Jowers endured was of short duration and Jowers did not present
evidence of medical treatment for her emotional injury.*fn2

The plaintiff has presented sufficient evidence to the Court
that establishes that she experienced emotional distress over
several months. The emotional distress Jowers experienced
affected her daily activities and interfered with her
relationships with her family and friends. Although no evidence
of medical treatment for Jowers' emotional injury was provided to
the Court, such evidence is not needed for a plaintiff to secure
an award of damages for pain and suffering under New York's Human
Rights Law. However, in light of the amount, duration and
consequences of the plaintiff's emotional distress, see
Kuper, supra, the Court finds that an award of $15,000 is
sufficient to compensate Jowers for the emotional injury she
suffered as a result of the defendants' discriminatory conduct. Punitive Damages

Punitive damages are available under § 1981 and the relevant
municipal anti-discrimination law. Punitive damages are not
available under New York's Human Rights Law. See Farias,
259 F.3d at 101. "An award of punitive damages is `a discretionary
moral judgment' that the defendant has engaged in conduct that is
so reprehensible that it warrants punishment." Tolbert v. Queens
College, 242 F.3d 58, 77 (2d Cir. 2001) (quoting Smith v.
Wade, 461 U.S. 30, 52, 103 S. Ct. 1625, 1638 [1983]). In order
for a plaintiff to receive punitive damages in an employment
discrimination action, the record must demonstrate that the
employer acted with malice or with reckless indifference to the
[plaintiff's] federally protected rights." Kolstad v. American
Dental Ass'n, 527 U.S. 526, 535, 119 S. Ct. 2118, 2124 (1999);
see also Luciano v. Olsten Corp., 110 F.3d 210, 220 (2d
Cir. 1997) ("[p]unitive damages are available under [Section
1981a] to the same extent and under the same standards that they
are available to plaintiffs under 42 U.S.C. § 1981" [citation
omitted]). The terms malice and reckless indifference, as used in
connection with an analysis concerning punitive damages, "pertain
to the employer's knowledge that it may be acting in violation of
federal law, not its awareness that it is engaging in
discrimination." Kolstad, 527 U.S. at 535, 119 S. Ct. at 2124.
Although a party seeking punitive damages does not need to prove
egregious or outrageous misconduct by the defendants, such
evidence supports a strong inference of the requisite intent.
See id.

Jowers requests $250,000 in punitive damages based on the
defendants' malice or reckless indifference to her protected
rights. The record before the Court contains the following
evidence from which a strong inference of malice or indifference
can be drawn: (1) Jowers' position was restructured because the
office "needed someone black in a leadership role"; (2) Dash told Jowers that her termination was not a consequence
of DME's financial condition, but rather, was necessitated
because she was not a "good fit." As Dash told Jowers this, he
alluded to complaints made by PCD staff members regarding Jowers'
race; and (3) the defendants promoted a black woman to assume
Jowers' duties and responsibilities following her termination. In
the circumstances of this case, given the short period in which
the defendants engaged in discriminatory behavior, the Court
finds that $10,000 in punitive damages is an appropriate award
for the defendants' reprehensible conduct.

Dash's Personal Liability

In order to hold an individual liable for racial discrimination
under § 1981, the specific allegations of discrimination "must
demonstrate some affirmative link to causally connect the actor
with the discriminatory action." Evans-Gadsden v. Bernstein
Litowitz Berger & Grossman LLP, 332 F. Supp. 2d 592, 596
(S.D.N.Y. 2004) (citation omitted). "In `each of the cases that
have allowed individual liability [under § 1981], the individuals
have been supervisors who were personally involved in the
discriminatory activity.'" Id. (quoting Hicks v. IBM,
44 F. Supp. 2d 593 [S.D.N.Y. 1999] [alteration in original]). However,
under New York's Human Rights Law, an individual employee,
including a corporate officer, may be liable for the
discriminatory conduct of other employees, if that individual has
an ownership interest or has the power to make, rather than carry
out, personnel decisions. See Patrowich v. Chemical Bank,
63 N.Y.2d 541, 542, 483 N.Y.S.2d 659, 660 (1984); Evans-Gadsden,
332 F. Supp. 2d at 597-98.

Dash is the chief executive officer and principal shareholder
of DME. As an owner, Dash is liable, under New York's Human
Rights Law, for the discriminatory actions of DME's employees.
See Evans-Gadsden, 332 F. Supp. 2d 597. However, the record
does not support a finding of personal liability under federal law because it is
unclear what role, if any, Dash played in the decision to
terminate Jowers' employment. Therefore, under state law, the
Court finds that Dash may be held personally liable to Jowers for
the damages Jowers suffered when the defendants failed to extend
an employment contract to her and terminated Jowers' employment
because of her race.

IV. RECOMMENDATION

For the reasons set forth above, the Court recommends that
Jowers be awarded: (1) her unpaid salary of $3,461.52 and
work-related expenses of $358.51, plus prejudgment interest on
these amounts calculated by the Clerk of Court from May 5, 2000,
at the rate of nine percent per annum, pursuant to CPLR § 5004;
(2) $25,000 in back pay, plus prejudgment interest calculated by
the Clerk of Court from May 5, 2000, pursuant to
28 U.S.C. § 1961, as described supra; (3) $15,000 in damages for emotional
pain and suffering; (4) $10,000 in punitive damages; and (5)
post-judgment interest calculated by the Clerk of Court from
March 16, 2005, at the rate prescribed by 28 U.S.C. § 1961(a).

V. FILING OF OBJECTIONS TO THIS REPORT AND RECOMMENDATION

Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal
Rules of Civil Procedure, the parties have ten (10) days from
service of the Report to file written objections. See also
Fed.R.Civ.P. 6. Such objections, and any responses to
objections, shall be filed with the Clerk of Court, with courtesy
copies delivered to the chambers of the Honorable Laura Taylor
Swain, United States District Judge, 40 Centre Street, Room 1205,
New York, New York 10007, and to the chambers of the undersigned,
40 Centre Street, Room 540, New York, New York 10007. Any requests for an extension of time for filing objections must
be directed to Judge Swain. FAILURE TO FILE OBJECTIONS WITHIN TEN
(10) DAYS WILL RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE
APPELLATE REVIEW. See Thomas v. Arn, 474 U.S. 140 (1985);
IUE AFL-CIO Pension Fund v. Herrmann, 9 F.3d 1049, 1054 (2d
Cir. 1993); Frank v. Johnson, 968 F.2d 298, 300 (2d Cir. 1992);
Wesolek v. Candair Ltd., 838 F.2d 55, 57-59 (2d Cir. 1998);
McCarthy v. Manson, 714 F.2d 234, 237-38 (2d Cir. 1983).

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